Tips for building a healthier startup
As the saying goes, Great companies are built in tough times. There is good reason for this. When there is an unforgiving financing environment, smart companies tend to focus a lot more on costs, more emphasis is put on generating that extra dollar of revenue for the same cost, low cost marketing innovations emerge, new initiatives put on hold, etc. While there is no reason to wait for a tough financing environment to engage in some of these company health activities, it is invariably in such times that great foundations and cultures are built. There is a general fear that some of the layoffs and other cost reductions will reduce company morale, etc. To the contrary, most cost rationalisations result in a happier productive employees.
Some practical tips for current entrepreneurs to build a healthier start-up -
1. Zero base your fixed costs - Look at every cost and see if that would have been a cost you would incur if you had to start the company today. Would you rent the office you are currently renting? Would you hire as many people as you have in each function? Is there way to convert cash compensation to more equity?
2. Restructure variable cost (for e.g sales force organisation) - Eliminate non performing sales professionals. Make a judgement call on the cost benefit of the top performing sales team. Sometimes top performers in a past year may not be as hungry to perform in the coming year. Younger hungrier talent at a fraction of the cost of a top performer may yield similar or better performance than someone who was a past performer and is not as hungry any more. Think of replacing the expensive performers with younger less expensive potential. This philosophy holds for other variable costs like service delivery, etc too.
3. Focus on Customer ROI - Understand your customer need better to see what more you can cross or upsell to them with the same resource/effort. In consumer facing businesses, don't waste monies on attracting consumers if you know that they will not be yield a positive return on customer acquisition cost
4. Think "Out of the box" in Marketing - Assess if there are other ways to achieve the same touch points. Invariably every company builds a lot of flab in marketing because it is very easy to justify a marketing budget. Innovative channel partnerships, guerrilla on the ground marketing, Word of Mouth, PR, are some of the innovations worth experimenting with.
Some practical tips for current entrepreneurs to build a healthier start-up -
1. Zero base your fixed costs - Look at every cost and see if that would have been a cost you would incur if you had to start the company today. Would you rent the office you are currently renting? Would you hire as many people as you have in each function? Is there way to convert cash compensation to more equity?
2. Restructure variable cost (for e.g sales force organisation) - Eliminate non performing sales professionals. Make a judgement call on the cost benefit of the top performing sales team. Sometimes top performers in a past year may not be as hungry to perform in the coming year. Younger hungrier talent at a fraction of the cost of a top performer may yield similar or better performance than someone who was a past performer and is not as hungry any more. Think of replacing the expensive performers with younger less expensive potential. This philosophy holds for other variable costs like service delivery, etc too.
3. Focus on Customer ROI - Understand your customer need better to see what more you can cross or upsell to them with the same resource/effort. In consumer facing businesses, don't waste monies on attracting consumers if you know that they will not be yield a positive return on customer acquisition cost
4. Think "Out of the box" in Marketing - Assess if there are other ways to achieve the same touch points. Invariably every company builds a lot of flab in marketing because it is very easy to justify a marketing budget. Innovative channel partnerships, guerrilla on the ground marketing, Word of Mouth, PR, are some of the innovations worth experimenting with.
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